Under the Energy Efficiency Directive (EED), member states will be allowed to set their own targets for energy efficiency, instead of the original plan for a mandatory EU-wide target of 20% improvements in efficiency. The result is likely to be a smaller improvement, of 17%.

Energy suppliers will have to improve their energy efficiency by 1.5% a year from 2014 to 2020, but green campaigners said that the number of exceptions included would bring the figure closer to 1%. Exceptions include suppliers being allowed to take into account efficiency improvements made from 2010 – four years before the directive is due to be in force – and prospective improvements from 2020 to 2023, after it has finished.

But the energy and climate change secretary, Ed Davey, claimed it was a victory for the UK and action on climate change, and denied the UK had watered down the agreement. He said:‬"The deal which has now been agreed is good for the UK and for the EU as a whole and maintains the EU's position as a global leader in tackling climate change.

"It signals a step-change in energy efficiency, and for the first time sets legally binding energy saving targets, which at a time of economic challenge will help improve the EU's competitiveness and boost growth."

He added: "The UK played a central role in not only brokering a deal but also increasing its ambition."

But green campaigners said the inclusion of improvements made since 2010 and after 2020, along with the weakening of ambition in the top line saving from 20% to 17%, were serious weaknesses. It is understood that the UK was the main player arguing for this watering down, as revealed by the Guardian.

Friends of the Earth energy campaigner Dave Timms said: "The UK government played a particularly significant role in weakening the directive by opposing an overall binding energy saving target and, at the last minute, insisting on loopholes so it could claim credit for old policies as a way of meeting its future obligation. Undermining European efforts to promote energy efficiency while proclaiming the benefits at home is both dishonest and damaging, especially from a self-proclaimed 'greenest government ever'."

WWF-UK criticised the government for "cynically undermining" the European Union's EED, saying that the government's position had "effectively scuppered" the potential for energy savings across Europe.

According to the EU, the core of the EED is the obligation on energy companies to help their customers save energy.

This requirement means that industry and the energy sector will have a shared responsibility to deliver concrete savings through, for example, building insulation and using energy-efficient appliances. The directive also requires the public sector to take the lead in the form of requirements for the renovation of state buildings and the promotion of green public procurement.

However, the original proposals would have seen the public sector take on a wider responsibility for efficiency improvements to all the buildings in public sector ownership, including social housing.

Martin Lidegaard, Denmark's energy and climate minister, will present the final compromise text to his ministerial colleagues at the Energy Council meeting on 15 June.

Lidegaard said: "During the last few months enough political momentum has been built up for the EU member states to lift the level of ambition of the directive in the final negotiations. Just a few months ago the European Parliament and the council were so far apart that it was almost utopian to believe in an agreement. But now we have taken another big step towards a more sustainable energy future."